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Despite AGIA Blessing, Alternatives to TransCanada Gasline Pondered
Although Alaska Gov. Sarah Palin has narrowed the field of gasline contenders to one — TransCanada — through the Alaska Gasline Inducement Act (AGIA) process, the door has reopened to a previously rejected candidate. Producer ConocoPhillips also is still in the hunt with its non-AGIA proposal, and a former governor told NGI that a rethink of the project is in order on a number of fronts.
“What I’m saying is that some of the things that people think have already been decided need to be reconsidered, let’s put it that way,” former Alaska governor Steve Cowper told NGI. He was the state’s governor from 1986 to 1989 and is a former chairman of the Interstate Oil and Gas Compact Commission. The main thing he has in mind is a different route to bring North Slope gas to the Lower 48.
“It would probably serve some useful purpose for there to be a reconsideration of shipping North Slope gas across the top to the Mackenzie Pipeline,” Cowper said. “It would upset a lot of apple carts, but if we’re speaking about addressing incremental gas needs just in time, that would seem to be a lot easier done than this big bullet pipe.”
The Mackenzie Gas Project pipeline would ship as much as 1.9 Bcf/d across 750 miles from the Mackenzie Delta south to the Beaufort Sea Coast. However, the project has suffered multiple delays, with its fate tied to efforts of a producer consortium. Late last year the Canadian government opened a new round of financing discussions for the project but stressed that no public money would be available (see NGI, Dec. 24, 2007).
Cowper said he’s worried that 4-5 Bcf/d of gas coming from the North Slope to the Lower 48 in one slug would flood the market and wreck producer netbacks. A route over to the proposed Mackenzie Pipeline would allow the gas to be more easily digested by Canada and the United States, he thinks. As for laying pipe through the Arctic National Wildlife Refuge, “Given the need for gas in this country, I think you could get the votes to do it,” he said.
Piping Alaska gas to Mackenzie “would put the Mackenzie line in a different light,” Cowper said. “It just seems like something that would be able to address the projected needs without having an excessive amount of gas that you would need to get rid of. Unless your distribution system has been set up in advance to get the gas where it needs to be, you’re going too have a depressed price structure where that gas hits the market.”
To be clear, Cowper, who is currently chairman of energy services and engineering company Wescorp Energy Inc., could best be described as an informed observer of the gasline wrangling, not a player in the process. However, his producer relationships and experience with gasline development efforts go way back. And he’s quick to voice his support for Palin and her efforts to move a gasline forward.
“AGIA is a product of Gov. Sarah Palin, and I have to say this: There have been people who underestimated Sarah Palin, and most of them look like a train just ran over them. She is a person who is a very strong and adroit governor. And she inherited the [gasline] mess that was created by earlier administrations, in my opinion, Alaska administrations. Judged with that in mind, her decisions look pretty good to me,” Cowper said.
One of Palin’s decisions — to reject an all-Alaska gasline proposal from the Alaska Gasline Port Authority (AGPA) as incomplete (see NGI, Feb. 4) — is being revisited by lawmakers. Rep. Ralph Samuels (R-Anchorage) has asked Los Angeles-based consultancy Econ One to review the AGPA plan at the request of House Speaker John Harris (R-Valdez). Although Palin had promised AGIA would consider a liquefied natural gas terminal option as outlined in the rejected AGPA proposal, lawmakers said they were concerned such an option wouldn’t get an adequate review.
Earlier this month, ConocoPhillips said it was reassessing how to advance its pipeline plan to commercialize North Slope gas (see NGI, Feb. 18) despite the Palin administration’s decision not to consider the company’s proposal (see NGI, Jan. 14).
While ConocoPhillips stepped up with its non-AGIA proposal, the other North Slope producers, BP and ExxonMobil, have been standing aside of the AGIA process. Moving a project forward will depend upon getting the producers together on a plan to commercialize the North Slope reserves, Cowper said. “I don’t see how it’s ever going to work out until the producers agree among themselves as to how it’s going to work,” he said. “Some of them may have to be pushed.
“If the producers are not going to control the construction…if they’re not going to be in a position to control the [capital expenditure] on the line, then they’re going to want a price certain on the tariff. If TransCanada can deliver a price certain on the tariff, it’s kind of logical that the producers would sign up.”
And that’s what TransCanada would like to do, with the help of the U.S. government. The company is seeking a “bridge shipper commitment” that would put the federal government on the hook for pipeline capacity prior to the pipeline’s construction. The plan would be for producers to step up and take capacity and for the government to step back, as explained by TransCanada’s Tony Palmer, who is heading up the project. However, U.S. Sen. Ted Stevens (R-Alaska) warned that Congress would not support such an arrangement, and he urged the state to strike a deal with the producers.
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